Ministry of Agriculture &
Farmers Welfare
THE FARMERS’ PRODUCE TRADE AND COMMERCE  ORDINANCE, 2020 IS A MILE STONE TOWARDS APPLICATION OF DIGITALIZATION IN AGRICULTURAL TRADE AND BETTER INCOME FOR THE FARMERS
Kolkata, 21st August, 2020
Amit Chattopadhyay, Agricultural Scientist
The day of 5th June, 2020 is important in the history of agricultural marketing, when “The Farmers’ Produce Trade and Commerce  Ordinance, 2020” was promulgated. This has created a free ecosystem for the farmers to sell their produce with transaction cost and deductions, enjoying all freedom of choices with better value realization for their produce. It has been realised that, farmers in India, who are mostly small and marginal, face challenges in marketing their produce such as lack of adequate price discovery, delayed payment etc due to variety of reasons. To address this, Government took a step and launched e-National Agricultural Market  in April, 2016. But slow adoption of full process by APMCs due to their inherent limitations earlier, now to adopt and fully implement this system has accelerated the process to provide this on-line mode of trade transaction through this Ordinance.
Introduction of Ordinance, 2020 is a mile stone towards application of digitalization in agricultural trade and creating further competition through e-trading platforms in the agricultural produce trade area. These virtual trading platforms will be free of APMC or other regulations and they will develop their own protocol for trading, payment etc. They will be competitive and not impose any type of fee, cess or levy etc under APMC Acts in the trade area, thus reducing cost of marketing by farmers. Through this system, farmers will be able to digitally access the entire country and will sell the buyers who offer better bids. The emergence of multiple e-platforms in the trade area will provide multiple choices of digital platforms to farmers and the platforms serving with improved efficiency, better pricing and ensuring transparent payment will be preferred by the farmers, which will help to enhance their income.
The advantages to the farmers from the Ordinance, 2020” are highlighted as under-
- Intermediation in supply chain will be reduced or even eliminated as processors, exporters, bulk buyers, organized retailers etc will directly buy from the farmers. This will result in enhanced price realization for the farmers.
- Farmers’ now will not require to take their produce to distantly located mandis but they can sell from the farm gate itself, their house or can sell even to the nearby located processing or exporting units. This will reduce the transportation and other logistical costs to the farmers, adding thereby to their income.
- Since, ordnance does not provide any scope for market fee or commission charge, therefore, this mechanism trade-transaction under ordinance itself will enhance farmers’ income substantially. In addition, farmers will be able to save other marketing charges.
- Presently, once the produce is physically brought into the market yard, he is bound to sell even if the going prices are at the rock-bottom level. Now the producer gets a choice to postpone sales and wait for better prices in case of price fluctuations for both perishables and non-perishables.
- The provisions of this ordinance are specifically beneficial for small and marginal farmers and their collectives in the farm of FPOs, which individually do not have strength to negotiate and also do not find economically feasible to transport to distant mandis. FPOs can leverage themselves by engaging in the value addition, branding, export and making better price to farmer members and FPOs can also establish, manage and operate e-trading and transaction platform.
- Online trading will help in capturing real time information on prices. The information can easily be disseminated among farmers. The penetration of mobile phones in rural area will further make it easy to deliver information to the farmers. Capturing online details of the transactions is one of the major advantages offered by the electronic trade portals as envisaged through the provisions of the Ordinance.
- Farmer’ right of title of land is fully protected and this is solely farming agreement no other agreement like lease and mortgage can be undertake. No permanent structure in the field or premises can be created. If such structure is created on requirement with the consent of farmer, it has to be removed by sponsor on his cost on termination of agreement, failing which the ownership will rest with farmer.
- Most importantly, farming agreement may be linked with insurance and credit instrument under any scheme of central or state government to mitigate risk and facilitate credit to parties to the agreement. Parties to the agreement can at any time with mutual consent alter, terminate or modify the agreement.
- Under this farming agreement, no obligation lies on the farmers in case of force majeure or so called act of God.
Farming agreement is a tool to make available assured price and market and also mitigates market and price risk both. Farmers are needed to engage with supply chain and food companies with trust build up and assured mechanism with supportive legal framework. “The Farmers  Agreement on Price Assurance and Farm Services Ordinance, 2020; is also promulgated for the aforesaid purpose. The Ordinance provides facilitative legal frame-work for preparing the agreement. Fair and facilitative provisions in the farming agreement are the key elements for creating a win-win ecosystem for parties to agreement and more so for farmers. This not only protects the interest of farmers but facilitates sponsor in the agreement to develop agribusiness, processing and export. Ordinance is comprehensive in terms of provisions to ensure smooth trade in the trade area. The provision will promote for investment in infrastructure  and logistics. The farming agreement between farmer and agro companies  is to be in written form for farming produce and the agreement may be bi-partite, tri - partite or even multi-partite. The companies/firms etc providing specific services, like supply of quality inputs or technology or any other service required may enter into the agreement. The agreement is to be for one crop cycle or production cycle but not exceeding for five years. If any production cycle needs more than 5 years to complete, it may be beyond five years, which is to be explicitly mentioned in the agreement.
Farming agreement is a tool to make available assured price and market and also mitigates market and price risk both. Farmers are needed to engage with supply chain and food companies with trust build up and assured mechanism with supportive legal framework. “The Farmers  Agreement on Price Assurance and Farm Services Ordinance, 2020; is promulgated for the aforesaid purpose. The Ordinance provides facilitative legal frame- work for preparing the agreement. The farming agreement is heart of the entire mechanism.
CG
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